Louisiana ~ Corporate, Personal Income Taxes: Motion Picture Production Credit Revamped

CCH Tax Day Report

Louisiana Gov. John Bel Edwards has signed legislation that makes significant changes to the corporate and personal income tax credit for motion picture production expenditures. Under the new legislation, the following tax credits are available for state-certified productions:

— Base investment credit of 25% for projects in excess of $300,000, or if a production is a Louisiana screenplay production;

— Additional base investment credit of 5% for projects filmed outside the New Orleans Metro Zone, but not including St. John the Baptist Parish;

— Additional base investment credit of 10% for certain expenditures from $50,000 to $5 million for projects meeting Louisiana screenplay criteria;

— 15% credit for Louisiana resident payroll expenditures; and

— 5% credit for certain Louisiana-based visual effects expenditures.

The maximum credit available for the combined base investment, the out-of-zone and Louisiana screenplay base investment enhancements, and the additional Louisiana payroll and visual effects credits is limited to 40% of base investment.

The legislation also creates a new payroll tax credit for “qualified entertainment companies” (QECs). The QEC credit is 15% for new jobs with payroll between $45,000 and $66,000 per year, or 20% for new jobs with payroll between $66,000 and $200,000 per year. A QEC is an entity authorized to do business in Louisiana that is engaged in the development or distribution of audio, visual, or both audio-visual entertainment products for public consumption.

In addition, among other things, the legislation:

— limits the maximum amount of credits that may be granted for a single state-certified production to $20 million, except for state-certified productions for scripted episodic content that may be granted up to $25 million dollars per season;

— makes the $150 million annual credit granting cap permanent for applications submitted on or after July 1, 2017, and adds a 5% carve out of the front-end cap to qualified entertainment companies, a 5% carve out for Louisiana screenplay productions, and a 10% carve out for independent film productions;

— specifies that, beginning July 1, 2017, no more than $180 million of credits may be claimed on tax returns or transferred to the Louisiana Department of Revenue (LDR) per fiscal year;

— allows projects with an application date on or after July 1, 2017, to transfer credits to the LDR for 90% of the face value (previously 85% of value);

— prohibits transfers of credits to third parties for projects that apply for credits on and after July 1, 2017;

— provides a procedure for the transfer of legacy tax credits that have been recorded in the Louisiana Tax Credit Registry by July 1, 2017, to the LDR for 85% of face value;

— requires the LDR to subtract the face value of the credit from the remaining available cap when a credit or legacy credit is transferred to the LDR for completed transfer applications submitted after July 1, 2017;

— requires catering and craft services to be purchased from a Louisiana source to be eligible for the tax credits;

— permits certain productions for scripted episodic content and qualified entertainment credits to request final certification of tax credits more than once;

— requires state-certified productions to participate in an approved career-based learning and training program;

— requires state-certified productions to acknowledge the financial assistance received from Louisiana through the inclusion of a Louisiana promotional graphic or an alternative marketing option, including a donation to an approved Louisiana nonprofit film grant program;

— adds requirements to the application process that prevents stacking of film credits; and

— sunsets the credit for applications received after July 1, 2025.

Act 309 (S.B. 254), Laws 2017, effective June 15, 2017

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